Countrywide has issued forecasts for the housing market over the next two years amidst a warning that Brexit volatility is the biggest risk to performance.
It says house price growth will slow across all regions over the rest of 2017 and into the first half of 2018; there will be a recovery in growth rates beginning from mid-2018 and continuing into 2019 as wage growth returns.
“As Brexit negotiations continue, confidence will be volatile which will have implications for the pace of economic and housing market recovery. The outcome of these negotiations is the biggest risk to performance and is weighted to the downside” says a statement from the agency this morning.
In the immediate term Countrywide warns that average house price growth in Britain will be 1.5 per cent in 2017 compared with 5.0 per cent in 2016.
“While the first half of 2018 is likely to be more difficult, we forecast prices to end the year 2.0 per cent higher. By 2019 we expect house prices to be growing at an annual rate of 3.0 per cent” the agency predicts.
Greater London is likely to see price growth slow to zero this year before rising by 2.5 per cent in 2018 and 4.0 per cent in 2019. After two years of falls, prime central London will see price growth of 2.0 per cent this year, followed by 4.0 and 5.0 per cent respectively in the next two years.
Across the South East and East of England price growth will slow in 2017 to 1.5 per cent and 3.5 per cent respectively. In 2018 prices in these areas will rise 2.5 per cent and a slower 2 per cent. The South West will follow a similar pattern.
However, price growth will slow in the North, the Midlands and Wales.
The North East is expected to see no price growth this year, and to increase to 1.0 per cent in 2018 and 2.5 per cent in 2019. Price growth in the North West, Yorkshire and Humberside and the Midlands will follow a similar pattern of weaker annual price growth in 2017 and 2018, rising again in 2019.
Countrywide says weaker economic conditions will act as a brake on price growth as inflation eats into household incomes.
“We expect interest rates to begin to rise very slowly, from the spring/summer of 2018 but for wage growth to rise also, helping household budgets to recover. Rising interest rates and a more cautious approach from lenders – partly directed by the regulator – will prevent a faster increase in price as wage growth picks up” according to the agency.
Despite little recovery in the levels of housing transactions - due to affordability issues and fewer buy-to-let purchases - the rate of new building is not expected to gather enough pace over the next two years to catch up with previous shortfalls. A lack of supply will therefore continue to support the level of price growth.
“Economic conditions for households will remain challenging over the next year as inflation eats into budgets and interest rates begin to rise. In addition, fewer landlord purchasers and the later age at which people buy, is affecting the level of demand. But we expect the UK economy to recover and wage growth to pick up in response to global growth. That, combined with a continued lack of housing supply, will help to support house prices” explains Fionnuala Earley, Countrywide’s chief economist.
“The market is sensitive to confidence which will be affected by the outcome of Brexit negotiations and the implications this will have – particularly on employment” she adds.